Taxing the Informal Economy: The Current State of Knowledge and Agendas for Future Research
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The Journal of Development Studies Volume 50, Issue 10
This paper reviews the literature on taxation of the informal economy, taking stock of key debates and drawing attention to recent innovations. Conventionally, the debate on whether to tax has frequently focused on the limited revenue potential, high cost of collection, and potentially adverse impact on small firms. Recent arguments have increasingly emphasised the more indirect benefits of informal taxation in relation to economic growth, broader tax compliance, and governance. More research is needed, we argue, into the relevant costs and benefits for all, including quasi-voluntary compliance, political and administrative incentives for reform, and citizen-state bargaining over taxation.
Anuradha Joshi is a social scientist with a PhD in Public Policy from the Massachusetts Institute of Technology, USA with extensive experience in policy processes and institutional analysis. She is also a Professorial Fellow at the Institute of Development Studies (IDS). Her research interests lie in state-society relationships around the delivery of public services and accountability.
Wilson Prichard is an Associate Professor at the University of Toronto, an Associate Research Fellow at the Institute of Development Studies, Chair of the Local Government Revenue Initiative (LoGRI) and former Executive Officer of the International Centre for Tax and Development (2020-2024). His research focuses on the relationship between taxation and citizen demands for improved governance in Africa.
